Because of corruption case, State Investment Council suspends contract with Aldus Equity pending a review of investments
The State Investment Council (SIC) has suspended a contract with a financial adviser because of questions about a third-party marketer the company employed who has been indicted in a corruption scandal in New York.
The SIC announced at a meeting held today that it had suspended business with Aldus Equity, which has served as an adviser on national private equity funds, because of the New York case, SIC spokesman Charles Wollmann said.
The suspension is “pending further review of investments made under their guidance,” he said.
In March, Hank Morris, a former aide to the New York comptroller, was among those indicted in the scandal in that state. According to The Associated Press, investigators are “examining millions of dollars in payments that several hedge funds and private equity firms paid to placement agents” — often called third-party marketers — during the tenure of former Comptroller Alan Hevesi.
Morris and another aide are accused of shaking down companies that wanted to do business with the state.
It’s the same scandal in which, according to the New York Times, Steven Rattner, who heads the Obama administrations’ restructuring of the auto industry, has been described in documents as having arranged for his investment firm — the Quadrangle Group — to pay $1.1 million in exchange for business with the state of New York. The SIC also has investments with Quadrangle.
Morris is accused of receiving 95 percent of the money from Quadrangle in the allegedly illegal deal in New York.
Morris was a third-party marketer hired by Aldus to help it win a contract in New York. The company is named as a witness in that case but, like Rattner, isn’t accused of any wrongdoing at this point. There’s also no wrongdoing alleged, at this point, related to any dealings by Aldus or Quadrangle in New Mexico.
Wollmann said the SIC is reviewing the Aldus investments because it wants to ensure that there is nothing related to the New York case that would indicate wrongdoing or create an appearance of wrongdoing in New Mexico.
Third-party marketer disclosure
New Mexico law doesn’t currently require the disclosure of third-party marketers, including public-relations firms and lobbyists, who help firms win investment contracts. But the governor recently signed a bill that, beginning in June, will require such disclosures from companies seeking to do business with the SIC, Educational Retirement Board and Public Employees Retirement Association on alternative investments — those other than stocks and bonds.
Wollmann said that new level of disclosure “is healthy” and supported by the SIC. Since the indictments in the New York case last month, he said, the SIC has asked all companies it has contracts with to voluntarily disclose third-party marketers and terms of their agreements. Some have provided that information. Others have not.
Seeking such information is part of the review that’s taking place during the suspension of Aldus’ work for the SIC.
“We’ve got to make sure there are no underlying issues here we need to be concerned about,” Wollmann said.
He noted that the SIC’s investments are doing “very good.” The Land Grant Permanent Fund was down 1 percent for the first three months of the year. In the current economic climate, he said the SIC believes that will be “in the top 10 percent of funds around the country.”